Weak sentiments affects rural demand for consumer products: Edelweiss

Demand in rural areas is challenging, as reflected in a slowdown in low unit price packs, according to the study.Mumbai: Consumer product companies may be starting to see a liquidity crunch as reduced disposable income weakens sentiment, prompting wholesalers to stock less, according to a study by Edelweiss.

Bajaj Corp and Dabur are seeing a credit crunch in rural distribution, while for other such companies, the liquidity crisis not a widespread issue as of now.“Rural growth has been impacted by multiple factors,” said Abneesh Roy, associate director at Edelweiss. Apart from weak sentiment, the increases in minimum support prices for farmers as well as wages aren’t as high as they used to be. Also contributing are the rainfall deficit and a shortage of funds distributed through the government’s rural jobs programme, Roy said.Demand in rural areas is challenging, as reflected in a slowdown in low unit price packs, according to the study. Companies that operate in categories where rural penetration is low have seen better rural performance. There’s been good growth in household insecticides and hair colour, while detergents and soaps are facing a slowdown.Companies that have invested in rural distribution in the recent past are seeing a better performance.The urban-rural growth gap is set to narrow due to enhanced focus on urban infrastructure, a lower interest rate cycle kicking in, inflation under control and migration, the report added.